How much time is considered an 'unreasonable amount of time' for a Bhc Master Franchisee to assemble records for an audit, which would then require them to reimburse the Franchisor for audit costs?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
If an examination or audit discloses an underpayment or understatement of any amount due Franchisor by 2% or more, or if the examination or audit is made necessary by Master Franchisee's failure to furnish required information or documents to Franchisor in a timely manner, or it takes Franchisor's auditors an unreasonable amount of time (more than eight hours) to assemble Master Franchisee's records for audit, Master Franchisee must reimburse Franchisor for the cost of having
Master Franchisee's books and records examined or audited (this remedy will be in addition to any other rights or remedies Franchisor has under this Agreement or otherwise, including Franchisor's right to terminate this Agreement).
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, if it takes Bhc's auditors more than eight hours to assemble a Master Franchisee's records for an audit, Bhc will require the Master Franchisee to reimburse Bhc for the cost of the audit. This is in addition to any other remedies Bhc has under the agreement, including termination.
This provision highlights the importance of maintaining organized and readily accessible financial records. For a prospective Bhc Master Franchisee, this means implementing robust bookkeeping practices from the outset. Failure to do so could result in unexpected audit costs, especially if records are disorganized or incomplete.
Many franchise agreements contain similar audit clauses, allowing the franchisor to ensure compliance with financial reporting standards and royalty payment obligations. The specific time threshold (eight hours in Bhc's case) and the penalty for exceeding it (reimbursement of audit costs) are important details for a potential franchisee to consider. Efficient record-keeping is not only a matter of compliance but also a way to avoid potentially significant expenses.